Ottawa's ambitious plan to create a national securities regulator is "falling apart" and the Harper government is not doing enough to save the initiative, Ontario's Finance Minister has warned.

Dwight Duncan, the closest provincial ally of federal Finance Minister Jim Flaherty in his fight for a national body, said a national regulator is crucial to making sure Canadian capital markets remain competitive. But the proposal is at risk of being sideswiped by growing resistance from other provinces, he said.

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Quebec, Alberta and Manitoba are staunchly opposed to Mr. Flaherty's plan to replace Canada's 13 provincial and territorial regulators with a single entity that would police the buying and selling of stocks and bonds. Now officials in British Columbia and New Brunswick are expressing serious concerns, and Saskatchewan, which has not formally declared a position on the subject, is being pitched by Alberta on the idea of forming a regulator for Western Canada.

"I think the federal government is losing control of this file," Mr. Duncan said Thursday. "I'm getting very nervous about this. There's no federal leadership."

Mr. Duncan's rare outburst against his federal counterpart illustrates the political difficulties that accompany Mr. Flaherty's attempts to overhaul a system that has existed for decades and is frequently derided by investors and public companies as both inefficient and ineffective. What worries Mr. Duncan is that Ontario could end up as the lone provincial voice backing the plan.

Mr. Flaherty countered that successive federal governments have tried and failed to change the system over the past 40 years. "We as the federal government have moved the issue farther down the field than ever before in the history of Canada," he told reporters on Thursday.

The fate of the country's antiquated regulatory system will ultimately be determined by the Supreme Court of Canada, where the federal government will attempt to secure a ruling that it has the authority to create a single agency. Mr. Flaherty said the matter is "quite properly where it ought to be now."

Every province, with the exception of Prince Edward Island and Newfoundland and Labrador, has filed an application with the top court seeking to participate in the two-day hearing next April.

Alberta and Quebec have always said they want no part of a national regulator. Manitoba formally renounced the initiative in an affidavit filed in the Supreme Court.

The federal government will face an uphill battle in court, given the number of provinces resisting the initiative, said Eugene Szach, a lawyer in the Manitoba government's Justice department.

"One of the issues to be resolved is how the feds decide that they've suddenly acquired jurisdiction to take over a field that's been regulated by the provinces for decades," he said in an interview.

New Brunswick has not officially tipped its hand. But an expert witness for the government concludes in an affidavit filed in the Supreme Court that all three Maritime provinces have been shortchanged under Confederation.

"New Brunswickers and other Maritimers view 'National Policy' or 'National Policies' as code words for looking after the economic interests of Central Canada," Donald Savoie, a professor of public administration and governance at the University of Moncton and one of the region's most respected voices on public policy, says in the affidavit. "I see no reason why this 'national' initiative would be much different from other 'national' initiatives."

Saskatchewan has not taken a position on a national regulator. But Premier Brad Wall will be at the Grey Cup game in Edmonton on Sunday with Alberta Premier Ed Stelmach, where the two leaders plan to talk about securities regulation. "We'd like Saskatchewan to join us in our opposition to the federal proposal," said a spokesman for Alberta's Finance Minister.

British Columbia supports a national regulator, but it must be in the province's best interests, B.C. Finance Minister Colin Hansen said in an interview. "We would not want to see it in any way undermine provincial jurisdiction," he said.

The head of the B.C. Securities Commission warned this week that a national regulator could put the growth of British Columbia businesses in "serious jeopardy" by choking off access to investment dollars.

B.C. policy makers are at a crossroads. Premier Gordon Campbell backed the Flaherty plan despite significant opposition in his province. But now he is stepping down.

"With Campbell now on his way out, I think the people who have never been comfortable with this decision feel a new freedom to voice their views," said an Alberta government source.

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